1

I was wondering if instead of using some official index, I should calculate my own index, putting in the equation all my expenses and calculate how poorer or wealthier I get over the years.

Real estate is the biggest expenditure that I have, and its price is falling where I live. So, I was thinking that even if I get 3%-4% on my savings, due to real estate prices pushing prices down, I would be maybe 7%-8% better of every year.

Is that meaningful or just an illusion?

2

The question is interesting, in my opinion. But, I have to ask, given the effort of maintaining a balance sheet, your official "net worth" statement, why do you wish to complicate things with an index that's pretty localized to your region? The net worth number is what counts. And if you wish to divide it by your annual income (or annual expense, which ever you wish) you'll have a great idea of how you are progressing toward financial freedom.
Even that extra math may not be useful to some people. In the end, it's a question for you - How will it help you? If it helps you track your goals, and move toward them, it's a good thing. If it's a timesink that adds no value, then it's not.

2

All indexes are illusions, but some illusions are useful where others are not.

Where do your variables come from? For example, how will you calculate your own real estate price variable for your index? Will you just take it from some other index? How will you decide what weight to use for each variable? And if you don't actually buy or sell any real estate (or in general, transact in any particular variable), will you omit it from your calculation that year, as having no impact?

And when you have performed all the calculations, and you end up with your own Quora Fea Index, to what end will you use it?

If your index shows that you are 2% poorer this year, what will you do in response? Be depressed? Work harder? Ask for a raise? Get a second job?

If your index shows that you are 25% richer this year, what will you do? Give away 25% of your savings? Buy a yacht? Work part time?

Seems like a waste of time to me, other than to humor yourself.

  • +1 response, fellow Joe. Welcome to Money.SE. I hope to see you around again. I have a special place in my heart for software guys who write good code. – JoeTaxpayer Oct 17 '13 at 2:06
  • @JoeTaxpayer - Thanks. I like your website, as well as your tasteful name. – Joe Strazzere Oct 17 '13 at 11:41

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